Sophisticated Discipline in Nascent Deposit Markets: Evidence from Post-Communist Russia

Alexei Karas, William Pyle and Koen Schoors

No wp829, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Using a database from post-communist, pre-deposit-insurance Russia, we demonstrate the presence of quantity-based sanctioning of weaker banks by both firms and households, particularly after the financial crisis of 1998. Evidence for the standard form of price discipline, however, is notably weak. Estimating the deposit supply function, we show that, particularly for poorly capitalized banks, interest rate increases exhibit diminishing, and eventually negative, returns in terms of deposit attraction, a finding consistent with depositors interpreting the deposit rate itself as a signal of otherwise unobserved bank-level risk.

Keywords: banking; market discipline; deposit market; transition; Russia (search for similar items in EconPapers)
JEL-codes: G21 O16 P2 (search for similar items in EconPapers)
Pages: pages
Date: 2006-06-01
New Economics Papers: this item is included in nep-ban and nep-com
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Sophisticated Discipline in a Nascent Deposit Market: Evidence from Post-Communist Russia (2007)
Working Paper: Sophisticated Discipline in Nascent Deposit Markets: Evidence from Post-Communist Russia (2006)
Working Paper: Sophisticated discipline in a nascent deposit market: evidence from post-communist Russia (2006)
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